Overview

According to Statista, the retail sales value of cosmetics in China rose to $52.3 billion in 2020, making it the world’s second-largest beauty and personal care product market after the United States.  U.S. Department of Commerce data showed that in 2020, the U.S. exported $838 million of personal care and cosmetic products to China, up 2.2% from the previous year.  The slower growth in 2020 is a result of the COVID-19 pandemic, which affected the sales of consumer goods across most sectors.  The latter months of 2020 saw a trend towards recovery and China’s cosmetics market is expected to maintain its growth in the near future. 

Market Trends

The cosmetics industry in China has experienced steady growth in recent years, driven by rising demand for premium products and increases in the number of working women.  The overall market has expanded by over 150% between 2012 and 2020, with household spending on personal care and cosmetic products are expected to continue growing at 6.3% by 2025, according to Fitch Solutions.

 Source: China Galaxy Securities

 American premium skincare and sun care products have proven especially popular among Chinese consumers, with the lip makeup subcategory showing a notably rapid increase.  Other in-demand categories include specialty products in emerging market segments, such as personal care products for children and grooming and makeup products for men.  The overall 2020 cosmetics and toiletries market in China was dominated by skin products at 51%, make-up, and hair care products each at 12%, and oral care products at 10%.

 Source: Statista

Online Retail

The fastest-growing channel for cosmetics sales in China by far is online retail.  The increasing popularity of online channels reflects both limited access to retail stores and a lack of brand diversity in China’s Tier 2 and 3 cities.  This surge in online sales is driven by the significant advantages of selling through cross-border channels, where products are shipped directly from foreign manufacturers and distributors straight to consumers through bonded warehouses or a pre-approved Customs channel, as opposed to using traditional brick-and-mortar storefronts.

These cross-border products that are shipped to individual consumers are not subject to the same Chinese registration requirements as products sold through traditional brick-and-mortar channels.  This method of sale saves significant time and costs for U.S. companies and allows firms to avoid some China-specific requirements that may run against corporate values or practices, such as animal testing.

Chinese consumers spend a significant amount of time online reviewing products and often base their purchasing decisions on recommendations from family and friends.  China’s e-commerce platforms are increasingly influential in impacting consumer purchases by providing a platform for the beauty community to share shopping and product experiences.  For example, according to a Daxue Consulting study, the social media and e-commerce platform Xiaohongshu (Little Red Book) has attracted over 200 million users.  These users, who are predominantly female and under 26, fit into the target demographic for imported cosmetic product sales. Among online channels, live streaming has rapidly grown into a major sales platform for cosmetics, which are often marketed to smartphone-savvy consumers who shop via this method. Livestreaming, which doubled its market share from 2019 to 2020 and now makes up roughly 10% of Chinese e-commerce, will be an integral part of any successful multi-channel sales strategy.

Challenges and Barriers

China’s regulatory environment can be challenging for foreign companies to navigate, with many barriers to entry.  All cosmetics products sold through traditional channels must be approved by the National Medical Products Administration (NMPA).  Even if the product has already been tested overseas, it still must be tested in one of China’s NMPA-designated testing facilities before it can be sold in Chinese stores.

 U.S. companies must carefully follow all market entry procedures, product registration requirements, and specific labeling guidelines to enter and do business in China successfully. China currently requires a registration process with animal testing and a hygiene permit before imported cosmetics can enter the market.  Obtaining the hygiene permit requires a Chinese legal entity, or for overseas cosmetics manufacturers without representation in China, assistance from a Chinese agency.  The foreign company is required to sign a “Letter of Authorization,” confirming that it authorizes a Chinese company to be the registered responsible party in mainland China for its products.

 China has recently softened its animal testing requirement for domestic retail sales and no longer requires the test if the manufacturer’s home country issues a certification of the product quality management system, known as a Good Manufacturing Practices (GMP) certificate.  The United States does not issue GMPs, meaning this requirement is still de facto imposed on products manufactured by U.S. companies outside of China that are sold at retail establishments within China.

More information on China’s revised Regulation on the Supervision and Administration of Cosmetics enacted as of January 2021 can be found here.

Trade Events

China Beauty Expo-Shanghai

Cosmoprof Asia-Hong Kong